How to reduce your crypto tax bill before year-end

Whereas 2022 has been a 12 months to neglect for many crypto buyers, the daunting job of submitting crypto tax returns earlier than the top of December stays. Many buyers fear about unrealized losses on their crypto portfolio, whereas a failure to report crypto property and transactions on tax returns might land North American buyers into scorching water with the IRS.

To assist in submitting your crypto taxes, cryptocurrency portfolio monitoring and tax platform Accointing by Glassnode affords a simple resolution to immediately import and evaluation all crypto transactions and fill your crypto taxes in simply a few clicks. What’s extra, its tax loss harvesting instrument helps buyers decrease what they owe in taxes.

Find out how to optimize your crypto tax return?

Most crypto property, particularly cryptocurrencies like Bitcoin, have seen vital worth erosion in 2022. Some crypto buyers could also be tempted to cut back their tax invoice by underreporting revenue. Such a method, nonetheless, would invariably result in punitive motion initiated by the IRS. To keep away from that, US crypto buyers want to grasp all tax provisions obtainable and make the most of them to optimize their tax legal responsibility to the fullest.

For instance, suppose losses from promoting crypto property exceed capital features accrued by promoting worthwhile positions. In that case, buyers can deduct as much as $3,000 in opposition to extraordinary revenue and carry ahead any remaining loss to the subsequent accounting 12 months. This extra can then be adjusted in opposition to any capital features arising within the following 12 months.

Traders might additionally promote digital property which can be buying and selling at a worth decrease than their acquisition price, solely to purchase them later inside the similar 12 months. Though the IRS has excluded shares and securities from this tax-saving tactic, crypto property aren’t handled equally. Because of this, realized loss can be utilized to offset any capital features tax whereas additionally permitting buyers to keep up their web holdings.

How crypto tax loss harvesting reduces your tax invoice

When an investor has made a web revenue from all crypto transactions in a 12 months, positions at present incurring a loss equal to the capital features accrued could be offered. The loss from these positions can neutralize a portion of the capital features, thereby decreasing the general tax sum. This methodology of claiming is named tax loss harvesting. Nevertheless, opposite to standard notion, tax loss harvesting isn’t the identical as realizing losses and includes many calculations.

The most important challenges are figuring out which crypto property have to be offered and in addition computing the extent of loss relevant to these positions. Positions offered inside 12 months are subjected to short-term capital features tax charges, whereas these held for greater than a 12 months are handled as long-term capital features.

Say “Hi there” to Accointing’s common crypto tax calculator

Many crypto tax calculator suppliers available on the market cost a month-to-month payment, making these instruments untenable for many retail crypto buyers.

That is the place Accointing’s portfolio monitoring and compliance resolution can profit the 27-million-strong U.S. crypto investor base. Its complete crypto tax calculator is out there at no cost till Dec. 31, 2022 and exhibits you precisely how a lot it can save you on taxes this 12 months.

Utilizing the tax loss harvesting instrument, buyers can evaluation which crypto tokens to promote in an effort to offset any capital features, making tax loss harvesting a easy exercise. Moreover, it solely takes 5 clicks to get an correct tax report for transactions occurring inside 2022, with Accointing’s crypto tax calculator able to producing experiences for portfolios containing as much as 50,000 transactions in a calendar 12 months.

With simply days left earlier than the shut of 2022, Accointing’s crypto tax software program can save crypto buyers a variety of problem and assist them optimize their tax returns by using its helpful tax loss harvesting instrument. With Accointing acquired by on-chain market intelligence supplier Glassnode in October 2022, its customers will finally profit from the mixed funding intelligence insights supplied by the 2 corporations.